Central-Eastern Europe: Workers More Productive, At Least For Now

Workers in Central and Eastern Europe have become much more productive over the past decade, and have narrowed the gap with their Western counterparts. But the "catching-up" process is now slowing down. Those are among the findings of a new report by the International Labor Organization.

Prague, 3 September 2003 (RFE/RL) -- First the good news. Workers in Central and Eastern Europe have become much more productive in the last decade, and are closing the gap with their counterparts in the West.

Now the bad. At best, they're still only around a third as productive as German workers. And by some counts, the "catching-up" process is slowing down.

Those are among the findings of a new report by the International Labor Organization (ILO). RFE/RL spoke to one of the report's authors, Dorothea Schmidt. "It's true that the process of getting closer to the EU has slowed down a little bit, but still if you compare the growth rates with what's happening in [Western] Europe they are still enormous," Schmidt said.

The ILO looked at selected "transition economies" -- Slovakia, Poland, Hungary, Romania, the Czech Republic, Russia, and Slovenia. On average, Schmidt said, the group outperformed EU countries in terms of annual productivity growth. "The biggest gains we've seen are in Poland over the last eight years," she said. "This is true for output per worker as well as output per hour. They had gains in both of about 5 percent [per year], which is really exceptional. We've also seen big increases in Slovakia, of about 4 percent. In the Czech Republic we've only seen 2 percent in terms of output per person and 2.6 percent for output per hour, but that's still twice the average of the EU."

Nevertheless, there's a long way to go. If the report's figures are to be believed, employees in some Central European countries work long hours -- nearly 2,000 hours a year for Czechs and Slovaks, compared with fewer than 1,850 in the U.S. or even Japan. But they're not working as efficiently in that time. The report estimates that Polish workers per hour still only produce around one-third as much wealth as a German worker.

"What happens is that 'output per hour worked' really measures what technology you use, how efficiently people work, how good the machinery is -- all this is reflected in output per hour worked. But in an economy, if people work many more hours than in other economies, their output per worker per year is of course higher. And this is what we see in these countries -- people work long, long hours and this is why they have relatively good performance in 'output per person employed,'" Schmidt said.

Peter Havlik, a Central European economist in Vienna, estimates that labor productivity in the region is around half the EU average. But he told RFE/RL the catching-up process has quickened in recent years, not slowed down. "As far as labor productivity is concerned here, the catching-up process is even more pronounced," he said. "Most Central and Eastern European countries still continue to restructure, they have huge efficiency reserves, so employment has been declining. So this means that productivity catching-up has even been a bit faster than production catching-up."

Havlik said some sectors of the economy may be far more advanced than others within the same country -- usually thanks to the arrival of a large foreign investor. "The best examples are automobile factories or some electronic plants, basically companies which have been taken over by Western investors and restructured, like Skoda in the Czech Republic or Opal in Hungary or Volkswagen in Slovakia. All these companies have productivity levels which are comparable to productivity of similar plants in Austria or Germany," Havlik said.

The ILO says a mix of more foreign investment, investment in new technology, and workforce training can all help countries boost their labor productivity. Schmidt said Ireland is an encouraging example -- within some 15 years it transformed itself from an unproductive rural economy into Europe's star performer. But Havlik said it could take decades for the countries in Central and Eastern Europe to catch up with Western Europe.